Zalando to focus on profitability this year after profits slump

Zalando has said it will switch its focus to improving on profitability this year after its profits slumped and sales stagnated.

The company‘s adjusted group earnings before interest and tax (EBIT) fell by 60.1% last year to €184.6 million (£163 million).

The EBIT margin was 1.8%, compared with 4.5% in 2021, however the company hopes it new push for profitability, which includes jobs cuts announced last month, will help it to the top end of its 3-6% margin by 2025 and double-digit margins in the long term, co-CEO Roberts Gentz said.

For the remainder of the year, Europe’s largest fashion retailer expects adjusted EBIT of between €280 million (£248 million and €350 million (£310 million) with revenue between a 1% decline and 4% gain.

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Gross merchandise value (GMV) grew by 3% last year, to €14.8 billion (£13.1 billion) and Zalando now expects GMV growth of 1-7% this year.

Shares in the company were up 2.7% in morning trading.

“The challenges of 2022 demanded us to be laser-focused on profitable growth and we acted quickly and decisively with measures that improved margins such as the introduction of minimum order values,” Zalando’s chief financial officer Sandra Dembeck said.

“Our healthy balance sheet allows us to continue investing in our strategic priorities whether that’s driving customer excitement around relevant brands and assortment or helping partners to drive their direct-to-consumer business across a variety of channels.”

Gentz added: “Our long-term ambition remains unchanged. We remain confident that we will return to double-digit GMV growth in the mid-term, by further executing on our vision and strategy, and eventually serve 10% of the €450 billion European fashion market.”

Last month, the fashion retailer said it was planning to axe “several hundred overhead roles” over the coming months, as a result of the challenging economic environment.

Zalando did not specify exactly how many staff will be impacted, but said the cuts will affect several parts of the business, including at the senior leadership level.

However, it said that operations roles in its Zalando Studios and frontline operations roles in customer care, outlet stores and logistics centres will not be affected.



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